America Movil SAB de CV Q2 FY2024 earnings call

• Second quarter started with surge in long-dated U.S. Treasury yields, Mexican peso weakened after presidential elections.
• Added 2.4 million subscribers, with specific contributions from countries. Prepaid platform had net additions, fixed-line had broadband accesses but voice and PayTV units had losses.
• Revenue breakdown: service revenue up, equipment revenue down. At constant exchange rates, service revenue growth maintained, with mobile and fixed-line revenue growth differing.
• EBITDA growth driven by positive revenue growth and cost controls. EBITDA margin improved. Operating profit increased but net loss due to FX losses.
• Cash flow details: net debt increase, free cash flow increase, share buybacks increased from MXN3 billion in first half of 2023 to MXN12.5 billion in first half of 2024.

In the second quarter, América Móvil added 2.4 million subscribers, with 1.8 million being postpaid. Brazil contributed roughly half, Colombia 183,000, and Mexico 99,000. Prepaid platform had 599,000 net additions, with Colombia gaining 261,000 and Argentina 191,000. Fixed-line segment obtained 376,000 broadband accesses, including 148,000 in Mexico and ~63,000 each in Argentina and Brazil. Voice lines and PayTV units had losses. Second quarter revenue was MXN206 billion, up 1.5% year-on-year, service revenue up 3.5% and equipment revenue down 9.8%. At constant exchange rates, service revenue increased 4.7%. EBITDA totaled MXN83.1 billion, up 5.6% in peso terms and 6.9% at constant exchange rates. Consolidated EBITDA margin was 40.4%, a 1.5 percentage points improvement. Operating profit was MXN46 billion, up 12.9% year-on-year, but net loss of MXN1 billion due to foreign exchange losses. Net debt increased by MXN14.3 billion, free cash flow MXN10 billion greater than first half of 2023, leverage ratio down to 1.38 times EBITDA from 1.5 times prior quarter.

• On FX losses: Difficult to predict as net exposure involves derivatives and intercompany transactions, with noise from underlying peso depreciation.
• On prepaid decelerating: Prepaid trends vary by country, with users moving to postpaid and economy affecting spending. Anticipate trends may continue but people moving to postpaid and economic factors play roles.
• Share buybacks: Typically paced with cash flow, generally more in second half than first half. Distributions match free cash flow unless diverted to M&A or requiring CapEx.
• Chile: Three-year plan on synergies, cost reduction, infrastructure, 5G, fiber, and capacity agreements. Comfortable with progress on target, but competitive market.
• Mexico broadband: Net adds varied, but trend is to grow with good fiber capacity and coverage, and bundled streaming video working well.

• FX losses uncertainty due to Mexican peso depreciation and complex derivatives/intercompany transactions.
• Market competition impact on growth and ARPU, e.g., aggressive entry of competitors in Colombia affecting growth and ARPU.
• Chile's competitive market posing challenges in achieving growth targets.

Q: Can you break down the FX losses in this quarter? How should we forecast FX losses in correlation with the Mexican peso? And do you expect prepaid revenue to return to growth at some point?

A: On FX side, two-thirds of net exposure are in pesos, but net exposure after derivatives differs from actual FX movements. Prepaid decelerating varies by country, with users moving to postpaid and economy affecting spending.

Q: On ARPU growth, trends in Mexico, Brazil, Colombia; and on equipment revenue, impact of phone purchases and AI services?

A: ARPU growth in Mexico has 3.3% increase in last five quarters, Brazil in range of 6%. Equipment revenue decline in Mexico due to cheaper phones, AI may make people buy better phones initially then choose best at best price.

Q: Update on share buyback strategy for second half of the year and color on Chile competitive environment?

A: Share buybacks paced with cash flow, generally more in second half. Chile is competitive market with three-year plan on synergies, infrastructure, 5G, etc., comfortable with progress.

Q: Mexico mobile revenues decelerated, reason and trend; plans for M&A in Chile?

A: Mexico mobile revenue deceleration due to competition and promotions, ready to compete. On Chile, open to M&A alternatives but focus on synergies and infrastructure.

Q: Colombia competitive environment impact and Mexican fixed business competition and price hikes?

A: Colombia competition from new entrants reducing growth and ARPU, expect trend to improve. Mexico fixed business not planning price hikes now but ready to compete.

Q: Mexico fixed broadband net additions, migration vs new customers; Chilean JV equity, CapEx plans?

A: Mexico fixed broadband net adds include 150,000 new customers, migration not counted. Chilean JV equity contributions taken place, CapEx almost fully funded by EBITDA.

Q: Mexico broadband RGU net additions change, Brazil mobile services revenue growth acceleration and price hikes?

A: Mexico RGU net additions change due to climate and churn issues, trend to grow. Brazil mobile services revenue growth due to cost control, market share growth, expect continued growth.

Q: M&A geographies/assets interest and thoughts on artificial intelligence megatrend?

A: No M&A expected this year. AI is important, working on digitalization and using AI for efficiency, cost reduction, customer knowledge.

Q: Chilean JV disclosure and plans for VTR bonds?

A: JV operations and financials will be disclosed like other countries. VTR bonds will be serviced as América Móvil's debt with no plans for refinancing.